Candy Crush Goes Public!

We all have a love-hate relationship with the Candy Crush Saga. It's addicting to play yet equally frustrating when that one last bubble can't be popped. Well, the publisher of this game, King, has filed confidentially for an IPO. Based in London, King is following Twitter's footsteps in the IPO process. Although they filed confidentially, they announced the IPO soon before the investor roadshow begins.

Some worried skeptics predict that King could face the same fate as Zynga. Zynga started with relatively normal valuations at about $11/share. But after struggling with generating revenue and a lack of consumer demand for their games, Zynga fell off the radar. Now they're sitting at 3.78, well below their IPO price.

So what makes King a better investment? Well let's focus on Candy Crush. On my Android phone alone, I see that Candy Crush has over 100 million downloads. Let's double that for all the IPhone users out there. Then let's add a few million for the people who actually play on Facebook and not their phone. So with over 200 million users playing this game, it seems like a pretty sweet time for King to go public.

Another reason why King has an advantage over Zynga is because of the nature of its game. Candy Crush is designed to be psychologically addictive. For example, when the game starts, the first 50 levels are very simple for most players. This gives people overconfidence in their skill, and they believe that they personally are highly competitive players. They think they are highly competitive because everything they do on Candy Crush is linked to their Facebook account. On the game itself, they can see what level all of their friends currently are on. The whole game is a race to end. Finally, the game only allows you 5 lives before having to wait a certain amount of time to get more lives. This simulates a withdrawal effect in people, and consequentially they become more and more addicted.

The scientific nature of this game contrasts sharply with Zynga's games. Zynga allowed us to interact with our friends in games like Words with Friends, but we never felt superior over others nor did we feel powerless over when we could play the game. Also, Zynga's games had many more competitors than King's games. Many individuals have made their own versions of Scrabble and Poker that perhaps exceeded Zynga's version. With Candy Crush, however, no one has been able to remake this type of game.

Finally, Candy Crush has a high potential to generate cash. Already, estimates are out that King generates more than $600,000 everyday through Candy Crush alone. In a single year, that's over 210 million.

Now the catch. Is Candy Crush a fad? We can draw a comparison between Candy Crush and Farmville. Farmville had over 80 million users at one point, but in half a year, it dropped down to 20 million. Now, it's next to nothing. The psychologists who broke down the addictive factor in Candy Crush have predicted that in a few months of playing, people's interest in the game wears off. As the levels get tougher and the game depends more on "luck" than "skill," it's tougher to keep people engaged. I personally think that once the next big social game comes out, Candy Crush will be forgotten faster than Farmville. The game has another year at most to run. Hopefully, King has a backup game in mind to seduce its former Candy Crushers. If so, this seems like a great investment.

-Kunal Agrawal